34 Unit 1 The Economic System
Chapter Summary Chapter Summary
You and other consumers carry out economic activities every day. These
activities range from spending money to participating in the economic life of
your community and government.
Needs and wants are unlimited, while the resources used to satisfy
them are limited or scarce. Economists have defi ned four types of economic
systems. Most economies, including that of the U.S., are mixed.
People, families, and governments make choices involving trade-offs and
opportunity costs. These two concepts refer to what you give up when you
choose one item over another.
In the economy of the U.S., the laws of supply and demand serve to
answer the problem of scarcity. In the act of balancing supply and demand,
the system determines what to produce, how, and for whom. Consumers play
an important role in creating demand. Producers strive to meet demand and
earn a profi t doing it. The competition for profi ts in this system leads to the
development of new and improved products.
Review
1. What are the four types of economic
systems?
2. Why is the economic system of the U.S. a
mixed economy?
3. Describe the concept of scarcity and how
it applies to individuals, families, and
government.
4. Why are human needs and wants
unlimited?
5. What is the difference between human
resources and nonhuman resources?
6. What three challenges caused by scarcity
must all societies face?
7. What are the four basic concepts that
drive the economy of the U.S.?
8. Why is innovation important in
encouraging competition?
9. What is the relationship of trade-offs and
opportunity cost?
10. Why would the U.S. economy falter if there
was no opportunity to make a profi t?
11. How do the laws of supply and demand
relate to the prices of goods and services
in the marketplace?
12. What can you gain by learning more about
the economic system?
13. How do you and your family decide what
needs and wants to satisfy? What trade-offs
have you made in the marketplace? What
were the opportunity costs of your trade-offs?
14. Suppose you started a service business
such as babysitting or dog walking.
Describe how you would assess the
demand for your service.
Critical Thinking Critical Thinking